THE WHITE HOUSE

WASHINGTON ACTION

MEMORANDUM FOR: THE PRESIDENT

FROM: HENRY A. KISSINGER

SUBJECT: Your Talks with the Shah of Iran--May 30-31

Setting and Purpose

The two main purposes of your talks with the Shah will be (a) toassure his understanding of your global strategy and (b) to encouragehim in his efforts to knit tighter regional cooperation among those whowant to resist Soviet pressures in the Middle East.

You will find the mood in Iran a mixture of pride and confidence on theone hand and anxiety on the other.

The pride stems from Iran's achievements over the past decade,particularly the progress of the Shah's "white revolution" and Iran'sincreasing economic independence with a growth rate above 10% yearlyover the past five years. With this has gone an enhanced internationalstatus, which the Shah symbolized in the 2500th Anniversary celebrationslast fall. Iran is a country to be reckoned with in the regional context.

At the same time there is recognition that these rapid changes areproducing increasing internal dislocations and pressures against a back-ground of changes in the areas around Iran. This leads to anxiety ontwo fronts: (a) The Shah is concerned that the USSR may find ways tofacilitate the overflow into Iran of the instability that has developedin Pakistan, Iraq and Turkey. (b) Coupled with this is concern thatIran's stability and progress are too exclusively dependent on the Shah'sfirm personal leadership and that institutions and leaders are notevolving that could make an orderly transition if he were to pass fromthe scene. The Shah himself has voiced concern on this point fromtime to time.

The Shah's Specific Concerns

In the Shah's view, the situation in the Middle East, South Asia andthe Indian Ocean has changed markedly over the last year. For thisreason, he has been eager to talk with you and to have the demon-stration of US support which will come from a visit. His specificconcerns are these:

1. He sees the Soviet pacts with Egypt, India and Iraq asevidence of serious changes which have occurred to Sovietadvantage in the overall balance of forces in the Middle Eastand South Asia since a year ago. He has said a number oftimes that, while he does not oppose East-West detente inEurope this detente will pose dangers for Iran in temptingthe Soviets to expand into the Middle East and South Asia.The recent Soviet treaty with Iraq and the quick Soviet moveto establish diplomatic relations with the new Union of ArabEmirates were most disturbing to him as evidence that theSoviets now plan to pursue their interests in the Persian Gulfactively. He was deeply shaken by what happened to Pakistanin December.

2. Going hand and hand with this Soviet thrust, he sees theincreasing threat posed by situations on both sides of Iran.He is expanding his air defense system so that it will completelyring his borders.

--The Shah saw December's events in South Asia notonly in terms of the Soviets improving their positionbut with the fear that further disintegration in Pakistancould spill over into Iranian Baluchistan. He is worriedabout substantial Soviet capabilities in Afghanistan,which is vulnerable to the same kind of disintegration.The Shah has been impressed with President Bhutto'sefforts to hold Pakistan together, and he will probablysee Bhutto after your visit. Nevertheless, the situationon his eastern borders is a cause of concern as neverin the recent past.

--While Iraq is inherently unstable, the Shah isconcerned about the subversive efforts of whichIraq is capable, especially in Kuwait, in thePersian Gulf sheikdoms in Saudi Arabia and inJordan. These conditions lead him to the conclusionthat Iran must be as strong as possible militarilyto serve as a deterrent at least to the regionalmanifestations of Soviet encroachment.

3. In this connection, he may mention his plans for furthermodernizing his air force or possibly his new scheme to developa combination air and naval base at Chah Bahar on the southerncoast of Iran outside the Persian Gulf. His most recent requestsboil down to a request to purchase three squadrons of F-15aircraft when they are operational, laser-guided bombs and twoadditional squadrons each of F-4E and F-5E aircraft. Detailedresponses are in your talking points, and I shall be prepared tospeak to these issues. Generally, our response is to be helpfulwithin the practical limits of weapons production. On the port,a Defense Department survey team has just submitted a reportto the Shah. He is seeking financing through private Americanbanks and contractors, and Robert Elsworth at Lazard Frereshas been involved in trying to put together a consortium forthis purpose.

4.In addition to providing for Iran's own military strength,the Shah in recent years has worked hard to build a closeassociation with like-minded governments around him. Hehas, of course, sought to provide for the security of Iranthrough his country's development and through his participationin international organizations like CENTO and the Organizationfor Regional Cooperation and Development. But his principalvehicle has been a series of informal and clandestine relation-ships with Israel and Turkey on the one hand and with SaudiArabia and Jordan on the other. You will want to read Mr.Helms' memo at Tab B describing these relationships in detail.In short, however, the Shah has made a substantial effort in aquiet way to build a strong relationship with like-minded govern-ments around him. One of the principal channels for maintaining

these relationships is Kamal Adham, King Faisal's brother-in-law and chief of Saudi intelligence. He has made a series ofstops in Cairo, Amman and Tehran in recent weeks, and it ishe who has talked with King Hussein about Jordan's role in thePersian Gulf.

5. The Shah in connection with building his regional associationshas made a move since the death of Nasser to build a closer relationship with Egypt. Although he has been disappointed byPresident Sadat's actions in the past few months and is concernedabout his relationship with the USSR, he has been generallyimpressed by Sadat. Along with Saudi Arabia, he has viewedSadat as perhaps even a potential defector from the Soviet camp.His interest in promoting such a development has led him overthe past year to become increasingly critical of Israel's strategyof stonewalling all efforts at diplomatic movement. Israel haslong shared an interest with Iran in cutting Iraq and Egypt downto size, and Iran has provided a reliable source of Israeli oildespite Arab objections. Mrs. Meir's concern at the shift inthe Shah's attitude toward Egypt has caused her to try to mendher fences with the Shah on the eve of your arrival.

6. The Shah recognizes the changes that are taking place inthe economic organization of the world. He sees major economicblocs emerging and he feels that the Middle East should organizeitself to deal more effectively with the principal world powerblocs. He sees the need for regional development in the MiddleEast and believes that he probably has as good credentials asanyone for asserting some leadership in the region.

7. The Shah has been deeply concerned about Turkey. He feelsthat Turkey has lost its sense of direction in world affairs, andthis is exascerbated by its domestic political stresses.

What We Want from the Visit

1. You will be describing to the Shah the strategy lying behind your trips to Peking and to Moscow and the purpose behind your recent decisions on Southeast Asia. The Shah will understand your efforts to establish aframework of relationships between the nuclear powers that will permitregional powers like Iran to play the principal role in contributing tostability in their areas. The Shah has long understood the principles of

the Nixon Doctrine--the necessity for great-power relationships thatwill permit countries like Iran, as the world changes, to develop thecapacity to do what the US can no longer do around the world in providing the principal ingredients of regional security and stability.

2. Within this framework we want the Shah to understand that we are alert to the attention that the Soviet Union is giving to the area from Egypt through India and we want to encourage the Shah's efforts to knita close regional association with those nations in his area that want to resist the Soviet pressures. We want to encourage the Shah in hisspecial associations with Israel and Turkey, with Kings Faisal andHussein and even with Sadat. In your private conversations with theShah you can let him know that we are aware of the special relationshipwhich he has developed through his own private channels and that weshall support it. You can tell him that you discussed Jordan's role inthe regional context when King Hussein last visited Washington andencouraged King Hussein in this direction as well. You might evenwish to comment on the special effectiveness of the kind of specialchannels which the Shah is using to build this relationship since thosechannels save the partners the political embarrassment of publicity.

3. Since an important issue in the Shah's mind now is how he willbring President Sadat into this association and away from the Sovietcamp, you may wish to talk in some detail with the Shah about his viewson those prospects. The answer, of course, will revolve around anArab-Israeli settlement. We do not envision a specific role for the Shahat this point, but it might be well to ask the Shah how he feels he mightplay a role, giving his relationship both with Sadat and with Israel.Given Iran's position as Israel's main oil supplier and close communicationwith Israel, it has been suggested that the Israelis would pay particularattention to any role the Shah might play in participating in a guaranteeof the security of the water routes from the Mediterranean into thePersian Gulf. We have no specific idea in this connection, but you mightwish to explore it with him tentatively and lay the ground work for laterpossible involvement.

4. The question of oil relationships will probably come up. The context,of course, is that the US as well as Western Europe will become increasinglydependent on Middle East oil over the coming decade. In the shorter term,the Shah has pressed the oil companies hard for an increasing share ofthe revenues. You may want to tell the Shah that, while you recognize hisconcern to maximize oil earnings, you know you can count on him to

preserve the stability of energy relationships . You will recallMr. Flanigan's memo to you urging that you not encourage the Shah toexpect special access to the US market for Iranian oil. It is possiblethat the Shah will put less emphasis on access to the US market thanhe has in the past because Iran will probably have little difficulty inmarketing its oil elsewhere given the expanding world needs. Nevertheless, any remarks you might make on this subject could be put in thecontext of our need once again to look at our whole situation and to relatesuppliers to it.

5. It may be worth mentioning your attack on the narcotics problem. In some ways, Iran shares our part of the problem. Iran had stoppedproduction in the middle 1950s but then was the victim of imports fromAfghanistan and Turkey. At that point, Iran tried to close its bordersand began producing enough opium again to meet the needs of its ownaddict population. It has been proposed that we try to move toward anopium free zone which would include not only Turkey and Iran but Pakistanand Afghanistan as well. We are not at the point of being able to carrythis through yet, but you might want to mention your concern aboutthe problem to the Shah and your desire to cooperate with him on it.We are proposing a general paragraph in the communique on cooperationin this area.

Backup Papers

Further material is at the following tabs:

--At Tab A are talking points.

--At Tab B is an important memo from Mr. Helms on the Shah's roleas a regional leader and his clandestine relationships with Turkey,Israel, Jordan and Saudi Arabia.

--At Tab C is Secretary Rogers' memorandum.

--At Tab D is a copy of the schedule.

In connection with the schedule, it is worth noting that the Shah plans asubstantive talk after his dinner for you. Your proposed remarks havebeen drafted with an eye toward your making a statement on the essentialprinciples of your global strategy. Too often, we feel that this has not

been clearly understood, and there would be no better platform forrestating your views than Tehran. What you have to say could not beoffensive either to your earlier Soviet hosts or to anyone in theMiddle East, and yet it is a highly important subject.

May 19, 1972

TALKING POINTS

1. Iran's strength, vitality, bold leadership, and willingness toassume regional responsibility, are a classic example of what theUnited States under the Nixon Doctrine values highly in an ally.Indeed, the Shah was one of the earliest proponents of the new globalapproach you have been pursuing. Iran has earned -- and will have --our firm support over the long term, because:

-- Our support will be effective because of Iran's own nationalstrength and effective regional leadership.

-- This kind of supportive role is a role the U.S. will sustainover the long term.

-- The US-Iranian partnership is a crucial pillar of the globalstructure of peace the US is seeking to build. Your trips toPeking and Moscow exemplify your effort to develop a securebalance among the great powers. Great-power restraint --which we are seeking to build into the system -- devolvesmore responsibility onto regional powers. The US is countingon Iran to make a major contribution to regional and Third Worldstability, in the Persian Gulf and indeed in the Middle East andthe whole non-aligned world.

2. We fully recognize -- and view with concern -- the attention whichthe Soviet Union is giving to the area from Egypt through India.

-- The Soviets have continued to deliver increasingly sophisticatedweaponry to Egypt and on the eve of your trip to Moscow there wasa show of new weapons systems in Egypt. [There was some indi-cation that the Egyptians are now being trained on the TU-16 bomberwith air to surface missiles. The T-62 tank appeared in Egypt forthe first time. Soviet TU-22 bombers, the BLINDERS, appearedon a visit to Egypt. ]

-- The Soviets seem to have opened a new chapter in their long-standing cultivation of Iraq with the recent signing of their Friend-ship Treaty. This is cause for concern even though Iran wouldseem to be an inherently unstable base for Soviet operations.

-- Stability in the Persian Gulf is far from assured, though thetransition following the change in the British status was smootherthan we might have anticipated -- largely due to the Shah'sskillful leadership. We recognize that the Soviets have alsomoved quickly to establish their relationship with the Union ofArab Emirates and that the Soviets could be moving toward anaval presence with facilities in Iraq.

-- As the Shah knows, we were deeply concerned by last Decem-ber's crisis in South Asia. We very much valued his support.We saw the crisis as an example of Indian and Soviet violationsof just the principles which we feel need to be established for amore orderly world. The US is doing all it can to help PresidentBhutto get on his feet, but in his relationships with India there isnot a great deal we can do. We will, however, support his econo-mic program fully. We face a difficult situation in renewing thesupply of arms because our Congress is set against it and coulddestroy a substantial portion of our other military assistanceprograms over this issue. [Bear in mind that, while the Shahwants to see Bhutto succeed, he has always been suspicious ofhim.]

3. The US will do what it can to support the efforts of nations in thebroader Middle East to hold their own against Soviet pressures, butthe keystone of our strategy will be a strong association among those nations of the region that wish to resist Soviet pressures.

-- You are aware of the private relationships which the Shahhas built with Turkey and Israel on the one hand and withKings Faisal and Hussein on the other. While the US wishesto leave this a regional initiative, you want the Shah to knowthat we encourage it and support it wholeheartedly.

-- You fully understand the private manner in which the Shahhas conducted these relationships. It permits the partners torelate to each other as their real interests dictate without theinhibitions that publicity poses.

-- When King Hussein was in Washington, you discussed Jordan'srole in this regional context. You gave him your encouragement.In this case as well, we want this to be essentially a program inwhich the regional countries take the lead.

-- In the Persian Gulf, the US does not have any aspirationsto assume the British role. This is an area where a newkind of US presence must evolve; in substantial part itwill be provided by American business, technological,educational and diplomatic relationships. We mean this tobe a serious and coherent US presence for a long-termconstructive relationship with the Islamic world.

--For the moment we are keeping our small naval force in the Gulf. The Shah has some reservations about this,and you may wish him to discuss them frankly with you.[He has recently said he fears that the present US force ofthree ships is too small to do any good and yet just largeenough to provoke the Soviets to seek a presence of their own.He has suggested that perhaps the US should either withdrawor increase its force. ] We have maintained what we havethere on the grounds that our withdrawal now would give thewrong kind of signals. It is a tangible symbol of the US'sinterest in the area's security and stability. We plan to beefit up qualitatively. Iran's strength and this visible US supportare the best guarantee of regional deterrence.

4. The Arab-Israeli issue has been on dead center for some monthsnow. The Israelis have been increasingly outspoken publicly abouttheir desires for basic territorial changes to enhance their security.Sadat has become increasingly frustrated by this evidence that Israeldoes not plan to withdraw to anything like pre-war borders. TheSoviets have not shown much give. But it is in the interests of theUS and its friends to try to remove this impasse, which is a menaceto world peace.

- You would welcome the Shah's views from his contactswith the Israelis and Egyptians.

- Does he see any role for himself?

5. The Shah can be assured of continuing US cooperation with Iran.There are some limitations on our resources, but the Shah should restassured that the US will do its best to help. On his weapons requests if he raises them:

--Two additional squadrons each of F-4Es and F-5Es: We willapprove the sale of these aircraft. The Defense Department isdrawing together data on price and availability.

--F-15/F-14 aircraft: These will not become operational with ourforces, by present schedule, until late 1974. We anticipate sellingthem to Iran, but we want to be sure we have a good product beforewe commit ourselves. We had a bad experience selling the F-IIIbefore testing it operationally. But we will stay in close touch withthe Shah.

--Laser-guided bombs: We would prefer not to supply these [becausethey represent our most advanced technology and are in heavy demandin Southeast Asia where our forces have just begun using them]. Weare able to supply other guided bombs such as the Walleye and theHobo.

--If he mentions his concern that the FOXBAT will turn up in Iraq,you can say that we believe that the model of the Phantom (F-4E)that is scheduled for delivery to Iran next year is capable of defendingagainst the FOXBAT.

6. You may wish to describe the major efforts you have made to resolvethe narcotics problem in the US. You could put this in the context of howmany of the important relationships that will help to build the structure ofworld peace will be in fields like cooperation in resolving basic human andenvironmental problems. You are aware that Iran has many of the sameproblems in the narcotics field that the US has. We would like to movetoward fuller cooperation in this area. One of the ideas that has been pro-posed is having a regionally initiated opium free zone among Turkey, Iran,Afghanistan and Pakistan. We are not pushing a particular proposal now,but we would welcome the Shah's interest and initiative with his neighborsin this important area.

7. In the petroleum field, we will welcome the Shah's help in preservingthe stability of energy supply.

--If he mentions access to US markets, you could explain thepolitical difficulties of our import program, while saying wewill look sympathetically at any proposal.

One final point is a small one in a similar field. We have invested agreat deal in making the INTELSAT system operative worldwide, andwe hope that Iran will be able to ratify the convention before the closeof the year. It may be touch-and-go to get the necessary 54 ratificationsby December 22.